In Search of Dynamic Capabilities? Resetting the Research Agenda

Transcription

1 In Search of Dynamic Capabilities? Resetting the Research Agenda Harry E. Figgie Professor of Business Administration Harvard Business School 23 rd Annual Consortium For Cooperation and Competitiveness Bocconi University Milan, Italy June 10, 2016

2 Why are some firms more profitable than others? More structurally attractive industries (Porter 1980) But what explains intra-industry differences in profitability (Rumelt 1974) Because of firm-specific differences in resources (Teece 1982, Wernerfelt 1984) But what explains firm level differences in competences? 2

3 The Dynamic Nature of Firm Capabilities: Teece and Pisano (1994) and Teece, Pisano, and Shuen (1997) Capability differences stem from: 1. POSITIONS: firms have different starting points which constrain their choices (path dependence) 2. PROCESSES: firms have different high level processes to reconfigure assets and develop new competences ( dynamic capabilities ) 3. PATHS: firms make different choices about capability commitments (strategy) 3

4 Dynamic Capabilities Framework (Teece and Pisano 1994, Teece, Pisano, and Shuen, 1997) Choices of Capability Investments Flows Mediating Effect Asset Positions Stocks of Know-How Product Market Strategies & Competitive Outcomes Dynamic Capabilities Reconfiguration Processes 4

5 Where did the literature go from there? Choices of Capability Investments Flows Asset Positions Stocks of Know-How Product Market Strategies & Competitive Outcomes Mediating Effect Dynamic Capabilities Reconfiguration Processes Why are some firms more adaptable than others? 5

6 The Research Program After 20 Years Illusive search for dynamic capability why are some firms more adaptable than others? Is that really a strategy question? Where are the choices? Where are the trade-offs? Where are the commitments? Obsession with creating new terminology: capabilities, dynamic capabilities, dynamic routines, static capabilities, combinative capabilities, cognitive capabilities, competences, etc. Relatively little deep empirical work Primitive understanding of the very thing we are building a theory around NO PRACTICAL IMPACT ON PRACTICE

7 Getting Back to Basics What questions should a capabilities-based theory of strategy be trying to answer? Strategy about choice Competitive Strategy about choices that have consequences for competitive advantage A capabilities-based theory of strategy should be about capability choices and their consequences for competitive advantage 7

8 Dynamic Capabilities Framework (Teece and Pisano 1994, Teece, Pisano, and Shuen, 1997) This is where the action is! This is where the action is! Choices of Capability Investments Flows Mediating Effect Asset Positions Stocks of Know-How Product Market Strategies & Competitive Outcomes Dynamic Capabilities Reconfiguration Processes 8

9 Towards a Capabilities-Based Theory of Strategy Competition Occurs at Two Levels Firms Make Strategic Choices Here Product Market Competition Creating Advantaged Positions in Markets (Market Entry, Positioning, Deterrence, etc.) Firms Make Strategic Choices Here Capability Competition Creating Differentiating Capabilities (Investments in Technological, Operational, and Organizational Know-How) Source: A Normative Theory of Dynamic Capabilities: Connecting Strategy, Know-How, and Competition HBS,Working Paper,

10 Capabilities: Choices and Consequences Honda developing capabilities to design/manufacture a light jet Strategic Importance Honda becoming a drug company in 5 years Economically Infeasible Strategically Interesting Economically Feasible But Costly Honda developing capabilities to manufacture next generation Accord Economically Trivial Fully Constrained (No Choice) Full path dependence Prisoner of your past This is where we need new theory! Fully Unconstrained Traditional economic theory Change is costless/instant 10

11 Choice Space for Capability Strategy Broadening New Applications Know-How New Domain Know-How Application- Specific General Purpose Fortified Applications Know-How Fortified Domain Know-How Deepening Source: Pisano (2016) 11

12 Choice Space for Capability Strategy Broadening Application- Specific New Applications Know-How Honda building capabilities in light jet design Google building capabilities in auto design Fortified Applications Know-How Honda s investments in vehicle design simulation methods Google s R&D on internet search New Domain Know-How Honda s research in nano-science Google s investments in biology and genomics General Purpose Fortified Domain Know-How Honda training workers on quality improvement methods Google s research on advanced computer science Deepening A firm s capability strategy can be defined by its allocation of resources across these categories Source: Pisano (2016) 12

13 Open Questions: Things We Don t Know But We Should How to distinguish related vs. unrelated diversification Tend to distinguish related from unrelated moves after the fact Is Honda s entry into light jets a related or unrelated move? We can t predict how a given firm might develop over the next 5 years given their existing capabilities. In 2003, how many people predicted Apple would be in the phone business by 2007? We don t have normative frameworks to help managers decide among alternative paths. How should a company like Ford think about developing capabilities in autonomous vehicles? We can t predict likelihoods of success of developing new capabilities based on what we know about the firm today. Should Google try to develop its own car? Do they have the capability? 13

14 Summary No more definition papers please! Let s stop worrying about adaptability Dynamic capabilities is not a theory of strategy, and it won t be until it can: Answer puzzles that existing theories can t Provide useful guidance to managers Understanding capabilities requires very deep field research can t be done from 30,000 feet Go into the factory, the warehouse, the store, the engineering lab, etc. Find out what s going on!